Tactical PM moves the day after The Big Reset?

thc0655
By thc0655 on Fri, Apr 25, 2014 - 2:08pm

Here's a thought experiment I'd like your input on.  Whether anything like this happens or not, such a discussion seems ripe for learning valuable insights.  Here's the scenario:

On a Sunday evening, the President of the US calls an unexpected press conference in the midst of terrible economic/financial turmoil (worldwide crash in progress).  POTUS announces the US is going back on a gold standard to "save" Americans and the world economy (after destroying both, it's the least we could do!).  The US has revalued its gold at five times the current price and will defend that price with sales and purchases of gold, as appropriate.  Let's say Sunday's price is $1,500 and Monday's price is $7,500.  For those of you new to the game, I think that means an 80% devaluation of the US dollar.

If you have gold and silver in your possession as insurance against just this kind of event, WHAT DO YOU DO ON MONDAY (if not sooner)?  I have a few rudimentary ideas, but I'd sure like to hear from all of you.

1.  Sell (or even better: trade) my gold on Monday for $7,500/oz and buy silver with the proceeds.  This is based on my assumption that gold will immediately gap up to $7,500, but silver, since it wasn't monetized, will take a short time (hours, days, weeks?) to see an appreciation equal to gold's (and possibly an overshoot to 600%).  If I am right and nimble, I can capture all of gold's 500% appreciation and some large portion of silver's: 200-400%.

2.  Sell my gold on Monday for $7,500/oz and buy real estate.  In my city, a seller cannot refuse to sell to anyone who offers them the full asking price.  Real estate prices will quickly shoot up at least 500% but if I'm quick I can get in early at the "old" Sunday prices.  I would capture gold's increase and much of real estate's.

3.  Sign a long term contract (at Sunday's prices!) with a security company that employs former US special operations professionals to provide additional home security and body guard services for me and my family.  No matter how rich a gold standard would make me, no one wants to live in a world I've described above.  I certainly don't.

4.  Retire immediately and get out of the big city (within a week or less).  Start a new career providing any who still have real assets and wealth after this big reset with security services at the new Monday prices.

5.  Go to a gasoline wholesaler and sign a contract to buy 10,000 gallons of gasoline at Sunday's prices. 

Can you guys add to the list?  What would you do the day after The Big Reset?

Tom

10 Comments

KathyP's picture
KathyP
Status: Bronze Member (Offline)
Joined: Jun 19 2008
Posts: 87
Why Would Anyone Believe POTUS?

Sorry to be so distrustful, but I would not do anything on your hypothetical Monday.  I would suspect that the announcement was made to get me to rush out and unload my holdings and that something else entirely was going on.  I would wait and see before making any move.

My apologies to you for not adding to the list.  I'll look forward to the ideas put forth by others.

 

Kathy

Hrunner's picture
Hrunner
Status: Gold Member (Offline)
Joined: Dec 28 2010
Posts: 256
Fun Experiment

Fun experiment thc, thanks.  So I'll throw some out there and see if they stick.

I think what you are describing is coming, maybe not by the POTUS, but coming never the less.

Principle 1- do a mix of things, diversify.  Always a good principle.

Principle 2-  there is more than one right answer, speed is important, so don't get paralyzed by looking for the perfect answer.

(I think speed and timing would be of the utmost importance, as you imply)

Here are some additional maneuvers to consider:

Sell some gold and buy naked (unhedged) silver calls in a rational, ladder like fashion- $50, 100, 150 200, 300, 400, 500 (what the hell- $1,000) or something like that.

Normally, I don't like to trade options because, as is well known, you have to get price AND timing correct to make money.

But if you have near certainty about both, i.e. I know silver is going to $50 in less than a month, then options are a very efficient i.e. leveraged way to make a lot of money with a little money.

(Disclaimer- I already have physical silver, so I probably wouldn't rotate out of gold, but would if I didn't already own some physical.  Note that if silver jumps to the upside, you will have the same (good) choices to make as your gold scenario).

Short the stock and bond markets.  Place a few bets on a stock market before it falls (if timing permits).  Not more than 10% of assets, but we could make a few quick dollars during the stock market collapse.  If I were so lucky as to make a lot of cash on shorting, I would take profits and rotate out into the things below>>>

Sell gold for cash and buy the new devalued currency i.e. cash until the stock market collapses.   This is one of my personal favorites.  Again I already have cash (yes, you are correct it would be devalued by 80%), but since I like this option so much, I would consider adding to my cash stash.  Cash is a bit more liquid than gold. 

I would look to buy really great companies, or if you were a bit lazy, just buy the S&P500 at bargain basement prices.  I would look for great value companies that were already generating free cash, but would be careful and look for companies that were making products that did not depend on lots of easy credit to sell their wares.  Basic building supplies, toilet paper, cereal, fertilizer, medical supplies or generic drug companies, oil, in general commodity producers.  Avoid the Lockheed Martins of the world as the military will be a bit shy on funds in a post collapse world.

The new 80% world will probably look very Third Worldish for a while, so we would have to choose our business to buy stock in carefully.  No Abercrombie and Fitch for me, but cinder block makers and firearms companies, I'd look at.

Farm in a rural area.  I would immediately hire James Wesley Rawles to consult and buy the best farm/ retreat that I could afford.  Hopefully an already producing farm, but if not, timberland, grassland or potential farm could suffice.  I think an immediate decent into a Mad Max world is low on the probably scale (though not zero probability), but a medium slow decent (1-5 years) into very crappy urban and even suburban living is possible, so if you haven't already, now would be the time to get your farm.  Diversify the farm and hire if possible an experienced farmer-manager, try to arrange a payment in a portion of the crops, so that you are growing not a monocrop but as diverse a crop as reasonably possible.

Security through community.  The security company is an interesting idea, but I would go another step and contact like-minded PPers and similar and look for folks that would be open to relocation.  I assume some would be short on precious metals and cash but would be willing to trade skills and sweat equity for a homestead.  If some of those folks were ex-military or ex-LEO, instant security.  I would expect all homestead participants to learn some level of security training.

I personally would not buy large amounts of bulky commodities like lumber or gasoline.

Beef up your personal preparations.  As opposed to large amounts of commodities (gasoline in your example) I would double down on some preparedness items.  Essentially, all the things we have been talking in Resilient Life.  Water cisterns- IBC 350 gallon containers or similar, drill extra wells, energy i.e. solar panels, tools i.e. chainsaws, tractors (I like the idea of modular and multiple, so multiple small tractors of the same model), spreaders, firearms, spare parts and magazines, wood stovers, log splitters, ammo, reloading tools and components, seeds, antibiotics, bulk dry goods, spices, salt, sugar.  I would plan to use all of the above during my life, and could mitigate pain and suffering of my neighbors in the near future. 

I do think energy will be especially expensive in the new world (no free flowing credit to buy all that horizontal and deep ocean drilling equipment), so I would especially look to energy investments.  Some liquid fuel storage system, not to become a wholesaler, but to provide energy security.  Propane tanks and propane.  Solar panels and batteries as mentioned.  Timberland is energy, and I would ensure I could grow sustainable timber.  Perhaps windmills (for well pumping) but I am not highly enthused about wind power, maybe it's just my ignorance.

Local Investing.  I would look to save some cash to invest in my local community for neighbors who had skills i.e. ranching, but were short on cash to buy animals, fencing etc.  I would make a barter trade and invest in them in exchange for a portion of their chickens, cattle, fish, rabbits, etc.  I consider this a combination of the above, in that healthy neighbors equals food security and personal safety.

I would diversify into land outside the U.S., even if only a small house and land.  My personal country choices would be Canada, Australia, Chile in that order.  I'd be interested to hear others country choices.

That's a good running start.

Good weekend,

H

KennethPollinger's picture
KennethPollinger
Status: Platinum Member (Offline)
Joined: Sep 22 2010
Posts: 654
As the Buddha would say: BALANCE

Or Saint Thomas: Virtus stat en el medio.  Virtue stands in the middle.

I'd probably go HALF and HALF just in case either turns out to be financial reality.

THANKS for the opportunity to seriously think about this.  PLEASE read Chps. 9 and 11 of Rickards's book, The Death of Money--pertinent info.

blackeagle's picture
blackeagle
Status: Silver Member (Offline)
Joined: May 16 2013
Posts: 225
Who is the smartest?

Certainly not me... neither you. There is always a bunch of astute monkeys ahead of us.

At the second the POTUS makes the announce, everything will take off. Sunday prices? Gone in smoke.

This strategy is unrealistic because the timing of events is wrong. We will not have hours, days or weeks to unfold this plan. In minutes all the serious players will take their places.

My strategy: Today, make a plan to put  assets in safe condition before the reset. Once the reset happens, make a post-reset plan to survive and take advantage of it as much as we can. This second plan, can only be drawn in outline before the reset. After, we will be able to make the details. Too many things will change, too many unforeseen events will happen, rendering useless any detailed post-reset plan build before its happening.

JM

KennethPollinger's picture
KennethPollinger
Status: Platinum Member (Offline)
Joined: Sep 22 2010
Posts: 654
As Hrunner says

I posted my previous one BEFORE reading Hrunner.  Good job H!!!  I'd like to add one important thing, at least for me. Why choose a country where you have to fight the cold, snowy, and icy winters where you need to worry about heating and/or AC big bills???: Where, without greenhouses, you have a difficult time growing food. all year? (Assuming no major climate shifts, etc.)

For these reasons, among others, I already bought land in Costa Rica and I believe I have said enough about it already in these pages.  If not familiar with them, please visit: www.AwarenessCenters.com, and click onto Costa Rica Retreat and scroll down to Guest House Gallery, and other categories.

 

Hrunner's picture
Hrunner
Status: Gold Member (Offline)
Joined: Dec 28 2010
Posts: 256
KP, Hard is Security

KP,

I hear you, but hard=security.

Short growing seasons and cold winters demands hard working and smart, industrious people.

That is a selection process to me.

If I were a lazy, disgruntled Millenial with time and energy on my hands, looking for a permanent "Spring Break" environment, and a stocked fridge at KP's homestead, I'd be asking the nice man at the train station "How much for a ticket to Costa Rica?"

Oliveoilguy's picture
Oliveoilguy
Status: Platinum Member (Offline)
Joined: Jun 29 2012
Posts: 578
Would let the dust settle

I'd just go on about my day, building stuff, gardening. I might feel a little smug for being right, for having PM insurance, and I would probably point out to all the people who thought that I was crazy for getting ready that I have a plan that works, and try to help them catch up.

I'd also load my guns and figure that Social Unrest was just beginning.

The markets would be too unstable for any quick moves in the PM space. Would let the dust settle.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5463
nice scenario

Tom-

Your number of $7.5k is interesting.  That turns US gold reserves (assuming they still exist) into $2 trillion, which doesn't quite back M1 at 100% [2.78 trillion] but easily backs CURRCIR [1.26 trillion].

Based on what I've seen of the market, silver would take nanoseconds to gap higher.  Japan opens Sunday evening.  You might not have the opportunity.  Are coin shops open Sunday?  Perhaps you could find a private sucker that would trade silver at Friday's prices and gold at the fancy new Sunday price, but I'd bet a shop wouldn't fall for it.  It would be a good trade if you could do it though.

I agree "real stuff" would probably inflate too, although probably not by 5x.

POTUS may also impose a "windfall profits tax" on sales of gold.  50% or so, let's say.  So "trade" would be the better thing to do.  Government always wants to be the winner no matter what the outcome is.

I'm not certain it would lead to a 80% drop in the buck.  US might want to do this in concert with a bunch of other nations (Eurozone, Japan, maybe even China, etc).  They all reflate together.

Mechanically, I'm not sure this would multiply outstanding currency by 5x, unless a bunch of people sold their gold to the US government.  The amount of actual monetary inflation would depend on how many sales there were, since when people sell gold to the Treasury, the Treasury effectively prints money to buy it.

Mining shares would do well.  (Duh).  Although, there's that windfall profits tax again.

If all hard assets reflate, the stock market will probably pop higher, since shares are fractional ownership of the hard assets of the company.  Likely the market would reprice higher initially.  Quite rapidly.  I don't see it dropping on a reflation.  Bots would probably go nuts.

I don't see a security problem.  Likely this would be done to reflate out of a deflationary mess.  This would improve things - more money dumped into a deflationary quagmire would be seen as helpful.  Although...the money drop would basically happen initially only to holders of gold.  Talk about picking winners & losers!

Perhaps the more broad-based multi-year tax rebate is a more likely outcome for a reflation effort.

Just my initial thoughts.

 

sand_puppy's picture
sand_puppy
Status: Diamond Member (Offline)
Joined: Apr 13 2011
Posts: 1926
Private property rights remain intact?

Tom, 

Great game.  This brings up all of our baseline assumptions for examination.  

[As I read my own post I see that I have been reading WAY too many novels!!]

In this scenario, if I buy a chain saw and put it in my backyard shed, will others who covet my chain saw leave it there because it "belongs to me?"  i.e. --are property rights unchanged?

Can I leave home and go to my job with certainty that while I am gone, others will not enter my home and take my stuff?  --i.e. Is there continued respect for property and personal boundaries?

Suppose I buy a charming "farmette" that borders on a national park with 5 acres and a pond and a chicken coop?  Will displaced city folk take up residence on the edges of the 5 acres and start camping, then gardening, then farming?  A few weeks later their relatives arrive too.  They want you to be "fair" and share the five acres with all 12 families that now live with you.  If you say no, they view you as being "rich and greedy" and rise up to take what rightfully belongs to "all the people."  Oh, and the eggs from the chickens should be shared equally with everybody, too.  (Do you have enough chickens to feed 50 people?)

Can I purchase gas using my ATM card, or is the banking network down?  Is every cent of cash within the banking system "vaporized" or just not available for withdrawal?  Will your bank, that has just lost 80% of its assets be willing to let you come and withdraw "your money?"  (No)

Do local grocery stores have enough credit that large distributors, demanding payment in advance, are still willing to send the fleets of truck full of groceries out onto the roadways to my city?

Suppose I have purchased stock options that pay out.  Is the bank that sold them still solvent and is the electronic settlement system still working?  What if it is, and that money is deposited into my bank account--is it available to me?  Is the FRN cash I take out of the bank worth much?  Robbers quickly learn that everyone with savings is withdrawing the $$ and they stake out the banks and ATMs and rob people as they leave the bank....

How many people are hungry at this point in the scenario?  A hungry parent is desperate and will do absolutely anything to get food.   What if 0.1% of the population is starving and willing to kill to steal food.  Maybe not a full on Mad Max world, just the edges of it.  Would you be willing to walk into town to shop knowing that 10 of the one-thousand people on the streets are starving, desperate and armed?

Dimtri Orlov describes the social reintegration process of all the suddenly unemployed Russian soldiers.  They returned from Afghanistan to become "security employees" of the remaining employed and wealthy persons.  Then they figured out that they had all the power and had their employers live in the garage while they lived in the house and ate the best food.  Where would you keep your stash of gold coins and cash to pay the salary of your security detail? Do you think that they might find it and take it?  Your security detail might come to dominate quickly and you would find that you worked for them.

-----

The curse of a good imagination and a library full of post apocalyptic novels....

 

KennethPollinger's picture
KennethPollinger
Status: Platinum Member (Offline)
Joined: Sep 22 2010
Posts: 654
All the above speculation

just makes me want to give up even trying to figure it out--too many variables--and just prepare spiritually

for the end times, or a much insecure lower style of life, maybe even DEATH.   After all, if we do not identify with

our bodies, but with our consciousness, what does it matter what happens to our bodies.  As Advaita Vedanta

(Indian philosophy) says: "All is illusion," so just go with the flow and accept what comes, with peace.

 

OR, as in The Self Aware Universe, by Goswami (quantum physicist), just see it all as just ONE of the parallel

universes, and drop the struggle and enjoy the rest.  Maybe there is just too much attachment to surviving--for 

WHAT?? in the worst case scenario. As Alan Watts once said: "The ONLY security is our INSECURITY.

Is this a cop out??? or, a realistic proposition??

Anyway, thanks to all you folks for making me think--a serious fun thought experiment.

Still waiting for more,

Ken, aka. Zen

Did any of you read my past post on Meditation? an interview of Sam Harris?

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